"A surge in Thailand’s currency is putting the question of an interest-rate cut back on the table.

While economists predict the Bank of Thailand will keep its benchmark interest rate unchanged near a record low of 1.5 percent on Wednesday -- where it’s been for more than two years -- some debt investors are starting to price in a rate cut.

The baht has surged 7.7 percent against the dollar this year -- the strongest performance in Asia -- posing a risk to the export-reliant economy. Foreign reserves reached a record $191 billion last week, in a sign of the nation’s efforts to tackle currency volatility.

“The recent appreciation in the currency has once again raised the question of should the Bank of Thailand cut rates in order to lower the attractiveness of the baht,” said Rahul Bajoria, a senior economist at Barclays Plc in Singapore. “We don’t think the central bank would be keen to use the monetary channel to reduce that, as the current-account surplus remains very large.”

He foresees no change in borrowing costs in the Bank of Thailand’s decision due 2:05 p.m. in Bangkok. Here are some key factors to watch: ..."